Cost Control Measures in Obamacare

Prior to Obamacare, there were two big problems in our health care delivery system: access and affordability. Most of what people know about what has changed since the reforms were passed in 2010 have to do with access. Other than expansion of Medicaid and subsidies, there hasn’t been much discussion about what Obamacare put in place to tackle the affordability problem.

For example, I find that very few people are aware of the provision related to medical loss ratios (what Rick Ungar once called “the bomb buried in Obamacare“). They limit the amount of premium dollars that insurance companies can collect to pay for administration and profit to 15% (20% for those who market to individuals and small groups*). If insurance companies collect more than that limit in any given year – they are required to provide refunds to their customers.

Of course, that is a reform to the way health insurance is provided. I remember that when Obamacare originally passed, Ezra Klein pointed out that when it comes to cost control related to actual health care, there wasn’t a lot of consensus on what would work. And so just about every idea was captured in the law as an experiment (sounds exactly like how Kloppenberg described Obama’s philosophical pragmatism which, “embraces uncertainty, provisionality, and the continuous testing of hypotheses through experimentation”).

As Michael Grunwald writes, the administration is about to launch another one of those experiments.

The experiment the administration will announce today, a program called Comprehensive Primary Care Plus, is intended to shake up the way 20,000 doctors and clinicians treat more than 25 million patients when it goes into effect in January 2017. In a sharp departure from the current “fee-for-service” system, which offers reimbursements per visit or procedure, providers who volunteer to participate will received fixed monthly fees for every patient and bonuses for meeting various quality goals. When their patients stay healthier and require less-expensive care, many primary care doctors will also share in the savings to Medicare, Medicaid or private insurers.

As someone who comes from Minnesota where “managed care” was invented as an alternative to “fee for service,” it is important to point out how this incentive program is different.

Studies have shown that about a third of all healthcare is a waste of money; the joke in the medical world is that nobody knows which third. The “managed care” craze that flamed out in the late 1990s basically empowered HMOs to try to figure it out. In some ways, CPC-Plus uses a similar per-patient payment model, except the primary care doctor rather than the insurer will be responsible for managing the care.

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